Decentralizing India with Distributed Ledger Technologies - Part 2
In my previous blog post, I described a trending centralization in many aspects of India’s economy and the problems that accompany it. I also outlined a few ways in which distributed ledgers could be used to solve many of these problems by decentralizing capital, population, education, and governance. In this article, I attempt to elaborate further on the need and potential applications of distributed ledgers in India and their ramifications.
We live in a world today where many governments have become monumental entities that seldom reflect the true sentiments of a nation and are more keen on dictating their own. The feedback loop between the governed and the government has somehow devolved into mostly a one-way street. Decisions pertaining to the maintenance of this status-quo are priority nowadays and the needs of the population are just passive research material for the next campaign slogans.
Where did all the accountability go? When did the roles get reversed? I guess the more important question here is not a matter of when but why. Perhaps we have slowly and willingly let it happen under our very own noses. Perhaps we talk big in terms of democracy and governance but our mentalities are still stuck in the era of kings and peasants.
Even in today’s democracies, most people need an idol more than a good governor, a figure and a vision to be swayed by to exercise their voting rights. Most people, unfortunately, do not understand the complexity and importance of good governance over big government.
Instead of questioning this system of thought, we try to find solutions within it. Let’s vote for this guy, I see a lot of myself in him! Or let’s vote for the other guy, he has great oratorical skills and a presidential aura around his face..Such is the nature of the game being played.
Back in high school, an insightful teacher once told me; If there is a position of utmost power in the world, who would want it more badly? Would it be someone who wanted to truly do good and help uplift others, or would it be a clever con-artist who just wants to help himself? At the time, of course, I thought that the answer was the former option. Surely, only a benevolent person could win the hearts of the people who are giving him this power! A few years later, I realized how little I understood politics and how poorly I would fare if I were to, let’s just say put my benevolence for mankind on offer.
Today’s democracy is fueled by this poor understanding in all of us. Deep down, we all like to believe in someone. We all like to believe, that someone will do something good eventually. Thus, we have created holy pedestals of supreme power, up for grabs every 4 years, to whomsoever may win our hearts. Seldom do we acknowledge, that perhaps spreading out that power amongst all the people makes more sense? Perhaps it is not one person’s benevolence and vision that we want but a fair consensus amongst all of our individual visions?
This blind belief, a.k.a bhaktism (Indian slang), is our collective inheritance from the good old days of kings and peasants. As long as there is this need for blind belief, there will be a need for a king of this belief along with his make-believe kingdom (democratically appointed of course!), his goons and an army to protect it all. This belief, of course, could be anything that captures the imagination of the masses and gets them all riled up if it comes under threat. The king merely asks for total cooperation and self-sacrifice from the masses to ensure the safety of this make-believe kingdom. There you have it, the true founding principles of a neo-democracy, in a nutshell.
Forgive me for being so cynical of the masses, I just find it very hard to believe that just collecting votes from the many, automagically means that somehow the most deserving, truthful, intelligent, benevolent and selfless leaders come into a supreme post of power. We have been duped time and time again and will continue to be duped until we get rid of our dupable systems. If you have read my previous blog post, you’ll agree that I strongly believe (not blindly!) that people are as smart as the systems that govern them, need them to be. If we create systems of governance where power gets decentralized, then knowledge, responsibility, accountability, decision-making, wealth and prosperity follow suit. In short, people get smarter.
You give people more responsibility, they acquire more knowledge, become more accountable, become capable of making more informed decisions and thus are able to acquire more local independence, wealth and prosperity.
Until recent times, a lot of technologies, which have been in the cold, scheming hands of governmental and military organizations, have been tools only accessible to the powerful elite who have used it to further the reach of their power and maintain strict control over people. Technologies such as the radio, television and the printing press have historically been used to control the masses in one way or another. In short, technology in itself is a powerful tool to create societal constraints to keep people just as intelligent and informed as they need to be to maintain the status quo.
Today we are living in an era of exponential technological evolution. Just the sheer pace of change in the world of technology sometimes makes me feel like a hopeless primate toying with a smartphone. However, as a long-time technophile, I acknowledge that all technologies are created with either of two intentions; To give power to the people or to rob them of it. Each shiny new piece of software or hardware in the world falls in either the empowering or disempowering categories. This furthers into technological ecosystems that allow us to make money for ourselves (we are the creators) or ecosystems that make money at our expense (we are the product). Open-source technologies usually fall under the former category and closed-source/for-profit technologies seldom do that.
Considering that governments are by the people, for the people and all that good stuff, shouldn’t the technologies implemented and used by them reflect the same principles? Think of the technologies being used and coming soon to things like currency printing, e-governance, voting, tax collection, electoral bonds, national identity systems, smart-city projects, electricity generation/distribution, surveillance, and various other governmental services. Are these technologies going to reflect the same king and peasant mindset or are they going to empower citizens?
Enter the blockchain; You may have heard of it and you may have also heard about how banks, governments, and regulators are all studying it closely. Whenever this holy trinity starts to study a technology closely, one has to wonder, what about it do they love, or better yet, fear?
The blockchain is a core underlying innovation that is used in many cryptocurrencies. The anonymous creator(s) of the first cryptocurrency – Bitcoin, used it to solve the double spending problem in decentralized databases. "Double Spending" problem? Yes, a double spending problem, in the sense, if you have only a 100 bucks, you technically should only be able to spend no more than that. You should not be able to clone, copy or forge any previous transactions that you made.
In contrast, with a centralized database, an entity or proprietor runs a piece of software on their server to make sure no one messes with the integrity of the records and hence no one can “double spend” (If the records are account balances) or forge the records if it is something other than balances. The only caveat is that one has to trust this entity to make sure that they are unbiased, neutral and selfless divine beings that only care for the good of all people on this holy planet. Not too much to ask for.
So how in principle, did “Satoshi Nakamoto” (the creator(s) of Bitcoin) solve this problem? Well in the interest of a purely non-technical write-up, I will give you the gist of it. Bitcoin is a distributed ledger. The very first large-scale and public one used for monetary transfers. It solves this double spending problem in a simple albeit inefficient way. In simple terms, every participating full node of the Bitcoin network keeps an updated copy of the ledger of accounts. Every single transaction recorded on the network needs to be stored by every single full node on the network. This way, if anyone wants to print money out of thin air (ahem), they can’t. They would need to get the balances forged in every single full node in the network. A lot harder than discretely changing a few records in a centralized server. Of course, this is an overly simplified explanation and there is a lot more to blockchain beyond this principle, like miners/stakers (and their centralization), proof of <insert a deceptively simple term here> mechanisms (different consensus methods used to store transactions) and scalability challenges. Also, blockchains are not the only distributed ledgers out there that solve this double spending problem; there are systems like DAGs, gossip protocols, data chains, block lattices, and distributed hash table based ideas.. Yeah, a lot of jargons and very complex yet somehow elegant ways of solving the same problem.
The meta-term used to hide all this jargony is simply “Distributed ledger technologies” or DLTs. These DLTs all have some common properties. Firstly, they are all “trustless” to varying degrees. Trustless, in the sense that you don’t completely trust anyone or any corporation/organization to ensure that the system does its job with integrity and transparency. The trust is spread across the system, so it is very hard to break.
Secondly, they are all databases of some sort and hence they need not be only about monetary transactions. However, the monetization of these networks is critical to their trustless nature, which I will explain a bit later.
Thirdly, they are all, to varying degrees, decentralized, immutable, transparent, self-regulating, open-source and permissionless.
Now there is another breed of DLTs that are “permissioned” databases. They include all the same previously mentioned systems and their Jargons but they are essentially walled gardens. They are the antithesis of everything that the original inventor and subsequent pioneers of DLTs felt enthusiastic about. Permissioned ledgers do have their uses and benefits but they are not trustless and require all participants to be approved by a centralized and probably for-profit or pro-monopoly entity. These can find uses within corporate structures or organizations that are not very accountable to the general public or to anyone else not privy to the inner workings.
Before proceeding, I wanted to highlight the intrinsic and vital connection between Blockchains / DLTs and cryptocurrency. Yes, it is true that cryptocurrency is just one of the myriad potential applications of DLTs but, these systems are glorified databases without the cryptocurrency aspect. When regulators and governmental bodies tell you that they love blockchain and hate cryptocurrency (yeah like everything was created for them to judge as black and white), what they actually mean is that they love the transparency, work efficiency, traceability, immutability, data redundancy, and security that these systems provide to their monopoly over their sectors/industries, but not the fact that it also challenges their own monopoly itself. The cryptocurrency aspect of the technology is essential to keep it decentralized. These networks reward anyone who contributes to them without having a shred of prejudice or bias towards who they are or what their business is.
This is where the problem starts for the gatekeepers of our modern economy. They dislike the fact that their potential competitors or disruptors could be contributing and adding to the security of the very system that they rely on. This is the beauty and the beast of DLTs; the fact that they allow multiple non-cooperating parties to uphold a shared network using cryptocurrency that no-one controls. This leads to a free market and a leveled playing field where their monopoly is put into question. They will state that permissionless systems are for criminals, drug markets and money-laundering (which is a human problem and it is present in any medium of exchange that is not centrally tracked – like cash) but they won’t admit that the real reason they don’t like it is because it makes it hard for monopolization.
Now back to India and its challenges. As I had explained in my previous blog post, the country is historically decentralized by nature and it needs a technological foundation that reflects that very nature. Currently, the status of distributed ledgers and cryptocurrency in India is a legally grey area. As of today the reserve bank of India has outright banned regulated banks within the country from serving as crypto-fiat gateways and seems to be in damage control mode citing the lack of understanding, regulation and money laundering concerns. All valid concerns but the problem is, as always, not that black and white. Before the ban, cryptocurrency exchanges were legally operating fiat transfers and were AML / KYC compliant. The current ban has now incentivized new peer to peer models of exchange to spring up with functioning fiat gateways that are completely out of the oversight of regulators. They are essentially shooting themselves in the foot by making knee-jerk responses to an ill-understood technology. And historically, disruptive technologies tend to be like flowing rivers, they meander around any hurdles and obstacles that a (regulatory) landscape offers them. The only solution is for regulators to understand that all disruptive technologies cannot be stifled or stopped without unintended consequences and instead work with them. If you build a dam to artificially stop a powerful river, eventually it will get overpowered and cause floods; a lesson in ecological sustainability that has haunted many parts of India in the past.
Let us now assume that the regulatory bodies of India suddenly start to see reason and start treating cryptocurrencies as an integral aspect of DLTs. This should allow the legally operating exchanges to restart offering crypto-fiat trading pairs again and further build on their services. Their services can start to offer instant fiat-crypto-fiat exchanges to people, start-ups and businesses alike to start providing DLT powered services that are actually decentralized and inter-operable. The consequences could be ground-breaking in terms of the sheer amount of innovation that is possible with this technology. Why do I say so? Read on.
India is currently going through rapid urbanization and the current generation of people have seen a large magnitude change in terms of technology and modernization. Unlike many western countries, where technological maturity was slow and gradual, India has had very little time to adapt to mass modernization and western consumerism as we know it. What is even worse, as reasoned out in my previous article, we cannot have a form of consumerism and capitalism the west has enjoyed for decades due to our sheer population density in relation to limited natural resources and ecological sustainability. Couple this with a fast-growing middle class and increasing demands for standards of living, employment opportunities, shared infrastructure and services, and you can see that everyone owning a big fat house, car, appliances, and furniture in a big fat city is a pipe dream. It is like the holy grail of snake oil salesmen.
The solution to the rising population demands in proportion to ecological sustainability lies in a sharing economy, as many technologists have spoken before. Imagine everything as a service instead of ownership itself. Do you want lights in your house? Get on a monthly plan and you are guaranteed light bulbs, lamp shades, spotlights etc. With no maintenance costs and free setup and disassembly. Do you want power tools for your carpentry project? Rent them! Need appliances? Rent your TV, fridge, washing machine, toaster etc. At a tiny fraction of the cost, it takes to own and maintain them without any of the headaches.
Also, imagine everything you already own now becoming a potential service to others. The more and more things we start to share, the less trash we build up year by year and the less toxicity the environment faces eventually. Sharing economies also ensure very little to no downtime of these shared resources. Be it a bike, car, hand drill, lightbulbs, furniture, electronics etc, they all will be getting used most of the time which would reduce the need to manufacture the insane amounts we do now and start focusing more on quality manufacturing over quantity. Companies would be incentivized to create products that last longer instead of their current devilishly planned obsolescence.
However, sharing economies also have proven to become monopolistic under our current capitalist models. Look at these (fictitious) companies - Guber, Fairbnb, Twiggy etc. These companies take huge cuts of all the business transactions and the actual asset owners (delivery boys, apartment owners, taxi drivers etc.) all end up getting much lesser than what they would get if they just directly worked with their customers. This is where the monopoly part comes in, these people now can’t as easily get customers outside as they could before due to everyone now using these apps. Now for large-scale sharing economies in India, such a monopoly could also come at the cost of economic and environmental sustainability as well. Profits and greed eventually take over as long as there are positions of power in these companies.
The capitalist model and philosophy, in general, has a very poor collective conscience. All companies and manufacturers are only interested in sales and care very little about environmental or ecological sustainability. The incentive is to sell as much as you can while the earth burns. If any regulatory body tries to fine you for toxifying a lake or causing too much air pollution, that is merely a cost of doing business. Even regulatory bodies at some point end up losing steam and just play along the way the game is meant to be played. Pass the buck, morality, and conscience is for tree-huggers.
Of course, which businessman or capitalist would like to live amongst polluted groundwater, acid rain, toxic fruits and vegetables and smog everywhere? No one really, but hey they all will tell you that if you don’t play the game the way it is meant to be played, then you’re out of luck, and business. The problem doesn’t really lie in incentivizing sustainable business models, but rather implementing those incentives effectively in a decentralized fashion without monopolies emerging that start getting corrupted again.
So a sharing economy of things along with anti-monopoly and ecological sustainability? Another pipe dream? Perhaps not. Monopolies always form if there is something to monopolize. What if the sharing economy model also took a shared ownership approach? What if the decisions made by these companies were actually based on decentralized voting and consensus? What if every taxi owner was a stakeholder in a ride-sharing app? What if every cell phone tower owner was a stakeholder in the telecom services company? What if every delivery boy was a stakeholder in the food delivery company? If a board of directors is replaced by a sea of people, then don’t resources truly become shared? When resources are truly shared, what is there to monopolize? Food for thought.
I am not proposing that we re-decentralize the economy with some sort of wealth redistribution. I am only proposing that we limit artificial centralization arising from a gamed system. Humans are by nature not equal in terms of industriousness and drive, some will figure out their ways to more wealth and some will be content with the little wealth that they have. My point is rather why should we all pay a company a percentage of our earnings for just linking us with a customer? Isn't that a simple task of matching demand and supply? Isn’t that something artificial intelligence and opensource code can easily achieve? The only thing missing is some kind of distributed database that cannot be duped easily into forging transactions and earnings.. hmm. Sounds familiar?
Back to DLTs, they are the missing piece of technology for a true sharing economy to emerge. A bottom-up economy that actually reflects the wealth of its shared owners (hint: it is everyone!). If the economy is growing, everyone with a stake in it is getting more business and thereby prospering. There are no gatekeepers, no centralized service providers, no kings, and no peasants.
Using distributed ledgers, the people of India can become the co-owners of India. Since these ledgers are open and transparent, the stakeholders will be incentivized to come and join if they actually want to do good business and not play an artificial game of monopoly. A government running on a distributed ledger using a shared service model would mean all stakeholders including all the governors themselves, will only be interested in actual governance. Since actual governance is the only thing that brings money into their bank accounts! Expenses, costs, revenues, salaries, shared assets, voting results and party donations all get recorded on an independently verifiable distributed ledger. When the system cannot be duped, the people subject to it also cannot be.
The idea of minimum government, maximum governance can only be fully realized using smart decentralization and distributed ledgers. The same idea can be applied to commercial and other areas as well; minimum management and maximum efficiency.
To conclude, there is an ocean of untapped potential with distributed ledger technologies and a huge, diverse and hardworking population such as India. Properties of such systems that are capable of smart, end-to-end decentralized book-keeping combined with sharing economies of scale can create a truly diverse, sustainable and technologically advanced country that is capable of innovation on a scale never seen before.
The cryptocurrency aspects of DLTs are essential to maintaining the incentives that secure these networks amongst non-cooperating and often competitive entities. In addition, a lot of the decentralized functionalities offered by these cryptocurrencies need to be in the native token/currency and hence regulation in India needs to be inclusive of that fact. Fiat-crypto-fiat trading is also a no-brainer if innovation is to not be stifled, otherwise, the only DLTs out there would be permissioned databases, which beats the entire purpose of having a trustless, interoperable and anti-monopoly network.
Thank you for taking the time to read this! Hope it sparked a fresh perspective on the topic. As always, I am just a random person on the internet, my ideas are solely my opinions. If you beg to differ, feel free share your thoughts :)